EXHIBIT 99.4
------------
The Item 1115 Agreement.
Item 1115 Agreement dated as of February 24, 2006 (this "Agreement"),
between COUNTRYWIDE HOME LOANS, INC., a New York corporation ("CHL"), CWABS,
INC., a Delaware corporation ("CWABS"), CWMBS, Inc., a Delaware corporation
("CWMBS"), CWALT, Inc., a Delaware corporation ("CWALT"), CWHEQ, Inc., a
Delaware corporation ("CWHEQ") and UBS AG, as counterparty (the
"Counterparty").
RECITALS
WHEREAS, CWABS, CWMBS, CWALT and CWHEQ each have filed
Registration Statements on Form S-3 (each, a "Registration Statement") with
the Securities and Exchange Commission (the "Commission") for purposes of
offering mortgage backed or asset-backed notes and/or certificates (the
"Securities") through special purpose vehicles (each, an "SPV").
WHEREAS, on the closing date (the "Closing Date") of each
transaction referenced in Exhibit A hereto (each, a "Transaction"), the
Counterparty and CHL or an underwriter or dealer with respect to the
Transaction, enter into certain derivative agreements (each, a "Derivative
Agreement"), including interest rate caps and interest rate or currency swaps,
for purposes of providing certain yield enhancements that are assigned to the
SPV or the related trustee on behalf of the SPV or a swap or corridor contract
administrator (each, an "Administrator").
NOW, THEREFORE, in consideration of the mutual agreements set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereby agree as follows:
Section 1. Definitions
Company Information: As defined in Section 4(a)(i).
Company Financial Information: As defined in Section 2(a)(ii).
Depositor: Means CWABS, CWMBS, CWALT or CWHEQ with respect to the
related Registration Statement for which the entity of the registrant.
GAAP: As defined in Section 3(a)(v).
XXXXX: The Commission's Electronic Data Gathering, Analysis and
Retrieval system.
Exchange Act: The Securities Exchange Act of 1934, as amended and
the rules and regulations promulgated thereunder.
Exchange Act Reports: All Distribution Reports on Form 10-D,
Current Reports on Form 8-K and Annual Reports on Form 10-K that are to be
filed with respect to the related SPV pursuant to the Exchange Act.
Indemnified Party: As defined in Section 4(a).
Master Agreement: The ISDA Master Agreement between the
Counterparty and CHL, or if no such Master Agreement exists, the ISDA Master
Agreement assumed to apply to the Derivative Agreement pursuant to its terms.
Prospectus Supplement: The prospectus supplement prepared in
connection with the public offering and sale of the related Securities.
Regulation AB: Subpart 229.1100 - Asset Backed Securities
(Regulation AB), 17 C.F.R. ss.ss.229.1100-229.1123, as such may be amended
from time to time, and subject to such clarification and interpretation as
have been provided by the Commission in the adopting release (Asset-Backed
Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531
(Jan. 7, 2005)) or by the staff of the Commission, or as may be provided by
the Commission or its staff from time to time.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
Significance percentage: The "significance percentage", as the
term is defined and used in Regulation AB.
Section 2. Information to be Provided by the Counterparty.
(a) Prior to printing the related Prospectus Supplement,
(i) the Counterparty shall provide to the related Depositor such
information regarding the Counterparty, as a derivative
instrument counterparty, as is reasonably requested by the
related Depositor for the purpose of compliance with Item
1115(a)(1) of Regulation AB. Such information shall include:
(A) The Counterparty's legal name (and any d/b/a);
(B) the organizational form of the Counterparty;
(C) a description of the general character of the business
of the Counterparty;
(ii) if requested by the related Depositor (after the aggregate
"significance percentage", determined absent manifest error,
of all derivative instruments provided by Counterparty and
any of its affiliates to the SPV is 8.00% or more in respect
of Item 1115(b)(1), or 18.00% or more in respect of Item
1115(b)(2)) for the purpose of compliance with Item 1115(b)
with respect to a Transaction, the Counterparty shall:
(A) provide the relevant financial data required by Item
1115(b)(1) or (b)(2) of Regulation AB, as applicable
(as specified by the related Depositor to the
Counterparty) with respect to the Counterparty (or any
entity that consolidates the Counterparty) and any
affiliated
2
entities providing derivative instruments to the SPV
(the "Company Financial Information"), in a form
appropriate for use in the Prospectus Supplement and in
an XXXXX-compatible form (if not incorporated by
reference) and, unless otherwise instructed in writing
by the Counterparty, hereby authorizes the related
Depositor to incorporate by reference the financial
data required by Item 1115(b)(2) of Regulation AB; and
(B) if applicable, cause its accountants to issue their
consent to the filing or the incorporation by reference
of such financial statements in the Registration
Statement.
(b) Following the Closing Date with respect to a Transaction,
(i) if the Counterparty provided Company Financial Information
to the related Depositor for the Prospectus Supplement,
within 5 Business Days of the release of any updated
financial data, the Counterparty shall (1) provide current
Company Financial Information as required under Item 1115(b)
of Regulation AB to the related Depositor in an
XXXXX-compatible form (if not incorporated by reference)
and, unless otherwise instructed in writing by the
Counterparty, hereby authorizes the related Depositor to
incorporate by reference the financial data required by Item
1115(b)(2) of Regulation AB, and (2) if applicable, cause
its accountants to issue their consent to filing or
incorporation by reference of such financial statements in
the Exchange Act Reports of the SPV; and
(ii) if the related Depositor requests Company Financial
Information from the Counterparty (after the aggregate
"significance percentage", determined absent manifest error,
of all derivative instruments provided by Counterparty and
any of its affiliates to the SPV is 8.00% or more in respect
of Item 1115(b)(1), or 18.00% or more in respect of Item
1115(b)(2)), for the purpose of compliance with Item 1115(b)
of Regulation AB following the Closing Date, the
Counterparty shall upon five Business Days written notice
either (A) comply with Regulation AB by, (1) providing
current Company Financial Information as required under Item
1115(b) of Regulation AB to the related Depositor in an
XXXXX-compatible form (if not incorporated by reference),
with the understanding that, unless otherwise instructed in
writing by the Counterparty, the Counterparty hereby
authorizes the related Depositor to incorporate by reference
the financial data required by Item 1115(b)(2) of Regulation
AB, (2) if applicable, causing its accountants to issue
their consent to filing or incorporation by reference of
such financial statements in the Exchange Act Reports of the
SPV and (3) within 5 Business Days of the release of any
updated financial data, provide current Company Financial
Information as required under Item 1115(b) of Regulation AB
(in such a manner as complies with Regulation AB) to the
related Depositor in an XXXXX-compatible form and if
applicable, cause its
3
accountants to issue their consent to filing or
incorporation by reference of such financial statements in
the Exchange Act Reports of the SPV or (B) assign the
Derivative Agreement as provided below.
Section 3. Representations and Warranties and Covenants of the Counterparty.
(a) The Counterparty represents and warrants to the related
Depositor, as of the date on which information is first provided
to the related Depositor under Section 2(a)(ii), Section 2(b)(ii)
or Section 2(b)(iii)(A), that, except as disclosed in writing the
related Depositor prior to such date:
(i) The Counterparty or the entity that consolidates the
Counterparty is required to file reports with the Commission
pursuant to section 13(a) or 15(d) of the Exchange Act.
(ii) The Counterparty or the entity that consolidates the
Counterparty has filed all reports and other materials
required to be filed by such requirements during the
preceding 12 months (or such shorter period that such party
was required to file such reports and materials).
(iii) The reports filed by the Counterparty, or entity that
consolidates the Counterparty, include (or properly
incorporate by reference) the financial statements of the
Counterparty.
(iv) The accountants who certify the financial statements and
supporting schedules included in the Company Financial
Information (if applicable) are independent registered
public accountants as required by the Securities Act.
(v) If applicable, the financial statements included in the
Company Financial Information present fairly the
consolidated financial position of the Counterparty (or the
entity that consolidates the Counterparty) and its
consolidated subsidiaries as at the dates indicated and the
consolidated results of their operations and cash flows for
the periods specified; except as otherwise stated in the
Company Financial Information, said financial statements
have been reconciled (in a manner consistent with Regulation
S-X) with generally accepted accounting principles ("GAAP")
applied on a consistent basis; and the supporting schedules
included in the Company Financial Information present fairly
in accordance with GAAP the information required to be
stated therein. The selected financial data and summary
financial information included in the Company Financial
Information present fairly the information shown therein and
have been compiled on a basis consistent with that of the
audited financial statements of the Counterparty.
(vi) The Company Financial Information and other Company
Information included or incorporated by reference in the
Registration Statement (including through filing on an
Exchange Act Report), at the time they
4
were or hereafter are filed with the Commission, complied in
all material respects with the requirements of Item 1115(b)
of Regulation AB (in the case of the Company Financial
Information) and, did not and will not contain an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to
make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) If at any time the representations and warranties set forth in
3(a)(i) through (iii) are no longer true and correct, the
Counterparty shall provide notice to the related Depositor within
a reasonable time prior to any Company Financial Information
being required to be included in the Registration Statement, or
the Exchange Act Reports of the SPV.
(c) The Counterparty agrees that the terms of this Agreement shall be
incorporated by reference into any Derivative Agreement so that
each SPV who is a beneficiary of a Derivative Agreement shall be
an express third party beneficiary of this Agreement.
Section 4. Indemnification; Remedies
(a) The Counterparty shall indemnify CHL and the related Depositor,
each person responsible for execution of a certification pursuant
to Rule 13a-14(d) or Rule 15d-14(d) under the Exchange Act; each
broker dealer acting as underwriter, each person who controls any
of such parties (within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act); and the
respective present and former directors, officers, employees and
agents of each of the foregoing (each, a "Indemnified Party"),
and shall hold each of them harmless from and against any losses,
damages, penalties, fines, forfeitures, legal fees and expenses
and related costs, judgments, and any other costs, fees and
expenses that any of them may sustain arising out of or based
upon:
(i) (A) any untrue statement of a material fact contained or
alleged to be contained in any information, report,
accountants' consent or other material provided in written
or electronic form under Section 2 by or on behalf of the
Counterparty (collectively, the "Company Information"), or
(B) the omission or alleged omission to state in the Company
Information a material fact required to be stated in the
Company Information or necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) any breach by the Counterparty of a representation or
warranty set forth in Section 3(a) and made as of a date
prior to the Closing Date, to the extent that such breach is
not cured by the Closing Date, or any breach by the
Counterparty of a representation or warranty pursuant to
Section 3 to the extent made as of a date subsequent to the
Closing Date;
5
provided, however that the foregoing shall not apply to any
losses, damages, penalties, fines, forfeitures, legal fees
and expenses and related costs, judgments, and any other
costs, fees and expenses caused by the negligence or any
willful action of an Indemnified Party, including without
limitation any failure to make any filings as and when
required under Regulation AB.
(b) (i) If the Counterparty is required to provide Company
Information under the terms of Item 1115 of Regulation AB as
of the Closing Date and the Counterparty fails to take such
actions as are necessary to comply with the requirements of
Item 1115 of Regulation AB as and when required, to the
extent that such breach is not cured by the Closing Date (or
in the case of information needed for purposes of printing
the Prospectus Supplement, the date of printing of the
Prospectus Supplement), or any breach by the Counterparty of
a representation or warranty pursuant to Section 3 to the
extent made as of a date prior to the Closing Date, then
such failure shall, except as provided in clause (ii) or
(iii) of this Section 4, constitute an Additional
Termination Event (as defined in the Master Agreement) with
the Counterparty as the sole Affected Party (as defined in
the Master Agreement) under the Derivative Agreement. In the
event that an Early Termination Date is designated in
connection with such Additional Termination Event, a
termination payment (if any) shall be payable as of the
Early Termination Date by the applicable party as determined
by the application of Section 6(e)(ii) of the Master
Agreement, with Market Quotation and Second Method being the
applicable method for determining the termination payment
(notwithstanding anything in the Derivative Agreement to the
contrary).
(ii) If the Counterparty has received written notice from the
Depositor that the Counterparty is required to provide
Company Financial Information under the terms of Item 1115
of Regulation AB as of a specified date and the Counterparty
fails to take such actions as are necessary to comply with
the requirements of Item 1115 of Regulation AB as and when
required, and if such failure continues unremedied for the
lesser of ten calendar days after the date on which such
information, report, or accountants' consent was required to
be delivered or such period in which the applicable Exchange
Act Report for which such information is required can be
timely filed (without taking into account any extensions
permitted to be filed), and the Counterparty has not, at its
own cost, within the period in which the applicable Exchange
Act Report for which such information is required can be
timely filed caused another entity (which meets any
applicable ratings threshold in the Derivative Agreement) to
replace the Counterparty as party to the Derivative
Agreement that (i) has signed an agreement with CHL and the
Depositors substantially in the form of this Agreement, (ii)
has agreed to deliver any information, report, certification
or accountants' consent when and as required under Section 2
hereof and (iii) meets the rating conditions applicable to a
derivative counterparty for the relevant asset-backed
securities of each applicable rating agency, if applicable,
6
then (unless the Counterparty has taken the actions in
clause (iii) of this Section), an Additional Termination
Event (as defined in the Master Agreement) shall have
occurred with the Counterparty as the sole Affected Party.
In the event that an Early Termination Date is designated in
connection with such Additional Termination Event, a
termination payment (if any) shall be payable by the
applicable party as of the Early Termination Date as
determined by the application of Section 6(e)(ii) of the
Master Agreement, with Market Quotation and Second Method
being the applicable method for determining the termination
payment (notwithstanding anything in the Derivative
Agreement to the contrary).
(iii) At any time that the Counterparty has failed to meet its
obligations under Item 1115 and has failed to transfer any
applicable Transaction pursuant to clause (ii) of this
Section, then on or prior to any Early Termination Date, the
Counterparty may elect to designate a date as an Early
Termination Date (an "Elective Termination Date"), and the
termination payment referenced in clause (i) or (ii) above,
as applicable, shall be calculated and paid as provided in
such applicable clause.
(iv) In the event that the Counterparty or the SPV has found a
replacement entity in accordance with Section 4(b)(ii), the
Counterparty shall promptly reimburse the SPV for all
reasonable incidental expenses incurred by the SPV, as such
are incurred, in connection with the termination of the
Counterparty as counterparty and the entry into a new
Derivative Agreement. The provisions of this paragraph shall
not limit whatever rights the SPV may have under other
provisions of this Agreement or otherwise, whether in equity
or at law, such as an action for damages, specific
performance or injunctive relief.
Section 5. Miscellaneous.
(a) Construction. Throughout this Agreement, as the context requires,
(a) the singular tense and number includes the plural, and the
plural tense and number includes the singular; (b) the past tense
includes the present, and the present tense includes the past;
and (c) references to parties, sections, schedules, and exhibits
mean the parties, sections, schedules, and exhibits of and to
this Agreement. The section headings in this Agreement are
inserted only as a matter of convenience, and in no way define,
limit, extend, or interpret the scope of this Agreement or of any
particular section.
(b) Assignment. None of the parties may assign their rights under
this Agreement without the prior written consent of the other
parties. Subject to the foregoing, this Agreement shall be
binding on and inure to the benefit of the parties and their
respective successors and permitted assigns.
(c) No Third-Party Benefits Except as Specified. None of the
provisions of this Agreement are intended to benefit, or to be
enforceable by, any third-party
7
beneficiaries except the related SPV and any trustee of an SPV or
any Administrator.
(d) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York
without regard to the conflict of laws principles thereof.
(e) Amendment and Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties
hereto. No waiver of any provision of this Agreement or of any
rights or obligations of any party under this Agreement shall be
effective unless in writing and signed by the party or parties
waiving compliance, and shall be effective only in the specific
instance and for the specific purpose stated in that writing.
(f) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
(g) Additional Documents. Each party hereto agrees to execute any and
all further documents and writings and to perform such other
actions which may be or become reasonably necessary or expedient
to effectuate and carry out this Agreement.
(h) Severability. Any provision hereof which is prohibited or
unenforceable shall be ineffective only to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof.
(i) Integration. This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof. There are
no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject
matter hereof other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject
matter.
8
IN WITNESS WHEREOF, the parties hereto have caused their names to
be signed hereto by their respective officers thereunto duly authorized as of
the day and year first above written.
CWABS, INC.
By: /s/ Xxxxxx Xxxxx
---------------------------------------------------------
Name: Xxxxxx Xxxxx
Title: Senior Vice President
CWMBS, INC.
By: /s/ Xxxxxx Xxxxx
---------------------------------------------------------
Name: Xxxxxx Xxxxx
Title: Senior Vice President
CWALT, INC.
By: /s/ Xxxxxx Xxxxx
---------------------------------------------------------
Name: Xxxxxx Xxxxx
Title: Senior Vice President
CWHEQ, INC.
By: /s/ Xxxxxx Xxxxx
---------------------------------------------------------
Name: Xxxxxx Xxxxx
Title: Senior Vice President
COUNTRYWIDE HOME LOANS, INC.
By: /s/ Xxxxxx Xxxxx
---------------------------------------------------------
Name: Xxxxxx Xxxxx
Title: Senior Vice President
9
UBS AG
By: /s/ Xxxxxxx Xxxxxxx
---------------------------------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Director and Counsel
Legal Americas Region
Fixed Income Section
UBS AG
By: /s/ Xxxxxxxxx X. Xxxxxx
---------------------------------------------------------
Name: Xxxxxxxxx X. Xxxxxx
Title: Director
Region Americas Legal
Fixed Income Section
10
EXHIBIT A
---------
Transaction covered by this Agreement
1. CWMBS, Inc. CHL Mortgage Pass-Through Trust 2006-OA5
2. CWALT, Inc. Alternative Loan Trust 2006-4CB
